Tuesday Trading Thoughts

A quick trading note or two. 

The expected reversal in bond prices has occurred.  I got lucky yesterday, selling a large piece of a zero coupon very long-term Treasury just off the recent low yields (high price) that I had bought months ago when ECRI had insisted a U.S. recession was just around the corner or had started.  Then we had some strong jobs numbers and the sell-off occurred.  So I held on and got out with a small profit.  Still beat stocks and cash for the period.  I am guessing that more talk about money-printing is going to send yields higher for a while.  But I remain "constructive" on bonds, especially the 10-year Treasury.

Europe is talking "growth" (easier discussed than achieved, but the illusion of growth is easiest when money gets "printed").  Reports from Reuters and the Financial Times show gluts of commodities building up in Chinese ports.  Thus I bought PALL today favoring the view that said glut is old news but the Europe growth/inflation push is newer news (PALL is the palladium ETF.  Palladium is rarer than platinum but not as good a catalyst.  Of the four major precious metals, it is the least investor-driven.  It's shown the best relative strength of all of them lately, and my (amateur) read of palladium on the futures board is bullish.  This is a conscious trade thinking it moves at least to the lows of April.  This is not an investment, just a trade-- but I can sit with it if it drops in price. 

I continue to look with skepticism about stocks broadly.  Mostly this is because the media focuses on them, and uses the almost irrelevant price-earnings ratio as if that were the only way to value stocks.  That said, the valuation formulae much of the Street uses suggests the current rally probably has legs.  However, now that ECRI has, sort of, done a victory dance by saying that the recent back-up in unemployment claims and deterioration in the monthly BLS employment surveys gives them the fourth "leg" of the "chair" for their recession call has made me swing from thinking/hoping that 2011 was our cyclical equivalent of 2008-- a durable price bottom for risk assets-- to thinking/fearing that worse is yet to come.  So I'm waiting with cash, lots of trading profits already banked for the year, and mostly waiting for a fat pitch in the stock market.

For what it's worth, my research suggests that most people's investments that are not in tax-deferred accounts should be in tax-free bonds, in one form or another.